THOMAS MICHAEL POWER
Professor and Chair
406 243 4586
Mill Closures: Rational but Painful Adjustments to Low Prices and Excess Supply
The shutdown of the mill in Republic
is not an isolated event tied to the particular timber supply problems
associated with northeast
One way to get a more accurate perspective of these local
mill closures is to look outside the region and to national business analysts
who do not have particular local political axes to grind. What we experience in the
Lumber mills are shutting down across the nation. Both areas
and mills that do not rely on National Forests for timber supply are being
negatively impacted. In
In late October of last year, the Stinson mill in
Rather than blaming the US Forest Service for the problem,
timber industry analysts have pointed the finger at private forest landowners like Sierra Pacific. Resource Information Systems Inc., an
international forest industry analysis firm based in
We in the
Despite efforts to link the difficulties that lumber mills are currently facing to reduced federal timber harvests, such partisan political bickering makes two fundamental economic errors. First, it assumes the problem lumber mills face is lack of access to raw material rather than a surplus of raw material that is driving prices down. Second, it assumes that gaining access to the most costly sources of supply at the very time that the prices mills can get for their products are at record lows would some how help the mills. Logging the timber in roadless areas is costly because it is located in isolated, steep, remote timber stands that require new road systems and special harvesting techniques; to compound the problems with these areas, in general, they are dominated by relatively low valued trees. This is the opposite of the type of supply that would currently be useful to mills, at least if they were asked to carry those costs rather than shifting them onto US taxpayers.
Riding the roller coaster of international commodity prices is an unavoidable feature of a natural resource economy. Our farmers and ranchers, our mines and smelters, and, of course, our forest products mills have been doing it for a century or more. The consequences are not pleasant for any of us. The economic instability and insecurity that these commodity price cycles bring to our communities ultimately make them and their residents poorer. That is the reason that most of those over-specialized communities are currently focused on trying to diversify their economies.
Sacrificing the natural landscapes surrounding these communities in a last desperate attempt to keep mills operating even when market conditions indicate that reduced production is appropriate, undermines those diversification efforts by making the community less attractive to new businesses and residents. It is part of a death-spiral strategy rather than a path to revitalizing our communities. Yet that is the direction in which the current political scapegoating is committed to carrying us.
The Impact of Changes in Federal Timber Harvest in the PNW on Regional Economies
would expect that increased local harvest levels from federal lands will be
partially offset by either a reduction in imports to local mills or an increase
in log exports from the area. The history
Other market responses to changes in wood fiber values can
be expected to reduce the impact of the increase in harvest levels on federal
lands on wood products industries in those counties. As local harvests change, so, too, do local
stumpage prices. Markets can be expected
to adjust fairly quickly in a manner that weakens the link between local
harvests and local wood products jobs.
For example, during the 1990s when wood fiber values were high, the use
of round wood in paper production declined as the round wood flowed to lumber
mills first and then the waste products from those mills flowed to pulp and
paper mills. In addition, the use of
recycled paper fiber in regional mills increased. As a result, despite the dramatic declines in
federal timber harvests, both lumber and paper production remained relatively
constant during the 1990s in
Though the changes brought about by an increase in federal harvests would be opposite in direction as these examples of market adjustments to declines in federal harvest, clearly it is not possible to be confident about making projections of future employment impacts by simply multiplying a change in the number of board feet harvested times some employment or income “multiplier.” The relationship between harvest from one source of supply and forest products employment is not a fixed arithmetic relationship that can be captured though the use of such multipliers. Although the region expected that, as a result of the decline in federal timber harvests, it would lose over 100,000 jobs and become impoverished. Yet nothing of the sort happened. Timber multipliers have been dramatically shown to be an inaccurate way of modeling how a local economy adjusts to changes in one source of timber supply.
Ed Bond as quoted in the Sacamento Business Journal, January 5, 20001, Celia Lamb, staff writer.
 Missoulian, October 28 and 29, 2002, http://www.missoulian.com/archives/index.inn?loc=detail&doc=/2002/October/28-1838-z2.txt
 Paul Jannke, vice president of wood products, op. cit.
 Washington Mill Survey 1986-1996: Has the Sun Really Set on Washington State’s Forest Products’ Industry?, Dave Larsen and Phil Aust, Washington State Department of Natural Resources, a paper prepared for the 34th Annual Pacific Northwest Regional Economic Conference, April 26, 2000.